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PA IN THE MEDIA

Improving new products – a boardroom issue

22 February 2011

"The right mix of management and technical know-how is the key to getting best practice in new product development and introduction."STEVEN CARDEN, TECHNOLOGY AND INNOVATION CONSULTING, PA CONSULTING GROUP

Engineering and Technology Magazine

Steven Carden and David Bailey

22 February 2011

The right mix of management and technical know-how is the key to getting best practice in new product development and introduction.

Investment in New Product Development and Introduction (NPDI) is still strong, despite, or perhaps because of, the global recession. The boardroom has an even greater focus on making NPDI successful – faster, more innovative, higher quality, lower cost, resulting in a good product.

Even after years of developing heavyweight processes, industry’s success rate in NPDI is low. PA Consulting Group set out to measure how successful a range of companies has been at bringing new products to market, and also explored what the links between success and capability in ‘Lean’ were.

To do this we conducted two exercises. First, a survey that asked respondents to score themselves against a Lean maturity model (developed some time ago by PA, covering 24 key capabilities that are critical for strong NPDI performance). Secondly, a gathering of the leading thinkers from manufacturing companies to compare current thinking on the product development process and critical success factors – participants represented a good cross-section of industry.

The output from these two exercises was complementary and throws down a stark challenge to all manufacturing companies. Three critical findings were identified:

While companies surveyed see their maturity and capability in Lean NPDI to be ‘above average’, they deliver less than 70 per cent of products on time, and this number is only at that level due to fudging of launch dates or compromises in quality or functionality

there has been little success in improving the effectiveness and efficiency of NPDI

of the 24 key capabilities, the principles related to ‘people’ and ‘flow’ are most highly correlated with success.

We’ve learnt how a business can improve the success rate of bringing products to market and productivity by up to 30 per cent.

It is clear from our research that the drivers of NPDI performance are poorly understood. NPDI is a complex business system, not a process – a system that by its very nature seems more likely to be chaotic and iterative than linear and fully predictable. Businesses must learn to structure the system to allow product development programmes to flow and to enable high levels of effectiveness. Companies must apply the intent of Lean at the business system level focusing on the Lean principles of “creating flow” and “simplifying everything”. This needs management attention and intervention.

There are five critical steps to improving the efficiency and success rate of NPDI:

Understand the strengths and weaknesses of your organisation in NPDI

build understanding across the organisation and engage management in driving change

take initiatives that improve flow

simplify to increase productivity

define a people-based programme for the long term.

If you want to improve the performance of your NPDI, you need to understand where you are weak and where you are strong. Generally, these are non-competitive issues and we found that there were great advantages in sharing experience from other industries and competitors. An open community and exchange of ideas fosters a general improvement in performance. For specific performance improvement, PA works with businesses to benchmark themselves against the 24 elements of NPDI that we have identified as being critical.

For one of our clients, an international consumer goods company, PA provided a depiction of its NPDI maturity compared with two others. Comparisons with the situation in a radically different industry were as relevant and interesting as a comparison with a direct competitor. By benchmarking yourself against industry best-practice, you will identify those areas to focus on most.

Because NPDI is a business system cutting across the whole organisation, it is vital that the understanding of it and the case for change is held at management level. Improving performance often requires change in many areas, so there must be a common understanding of the way forward.

The ultimate objective must be recognised and agreed: is the business trying to launch new products or to achieve the same level of performance with fewer people and lower costs? Our experience is that either can be achieved in the mid-term, but that if the business starts by tackling productivity, then in fact both can be done long-term.

A number of our clients have been shocked at the low percentage of effort that is being applied to productive work compared with all the other activities in their departments.

Our research indicates that a key area for improvement is that of ‘improving flow’, ensuring that the teams are adequately trained and that team dynamics are professionally managed when the skills are constrained and there are multiple requirements for people to move around and fix problems. Resource management was similarly identified as critical – as every project in the portfolio fights over the one person who has a core technical skill. For project managers, securing this critical resource can mean success or failure, and so there is a tendency to secure the resource full-time to guarantee availability despite only needing a little help. To address this specific problem, we work with clients to provide incentive mechanisms that encourage the right behaviours – with incentives being different depending on the intended change.

Productivity, creativity and effectiveness in NPDI are stifled by poor governance, particularly when it is viewed as a business system, rather than a simple process. Governance needs to guide and not constrain, with a clear, flat organisational structure that supports decision-making at the right level. A clearly understood product strategy with contributions from all partners in the development supply chain can ensure a common goal.

One of the greatest strengths in successful product development companies is the know-how of its people – they lead rather than manage, they learn from past mistakes and use that knowledge. If people are moving around then this can only be maintained by investing in robust knowledge management and supportive knowledge transfer across teams. Creating “T”-shaped engineers who have the ability and motivation to step outside of their core skill area is an important enabler.

One of the key areas of concern raised by our delegates was the continuing problems in recruiting good engineers and the perceived decline in the average quality of engineers. Product development companies must invest in the education system to encourage the best graduates for the future.

Steven Carden leads PA Consulting Group’s New Product Development Service. David Bailey was until recently an expert in manufacturing at PA Consulting Group.